Walmart Takes $700 Mn Hit From IPO-Bound PhonePe’s ESOP Compensation

Walmart’s international business saw a sharp drop in profit in the September (Q3 FY26) quarter after it booked a $700 Mn non-cash, share-based compensation charge tied to PhonePe’s upcoming IPO.

Walmart said the third-quarter GAAP earnings for its international arm were hit by a one-time, non-cash charge of about $700 Mn linked to PhonePe’s share-based compensation. 

In its post earnings call, the retail giant’s CFO John David Rainey explained that the expense stemmed from a revaluation of share-based compensation in its Indian fintech subsidiary in the run up to its IPO. 

As PhonePe’s implied valuation rises ahead of a listing, accounting rules require Walmart to recognise the increased cost of equity granted to employees, even though no cash actually changed hands. The charge weighed on reported profit but had no impact on operating cash flow.

“This was a discrete non-cash charge related to share-based compensation expense in contemplation of a potential IPO. Return on investment, as measured over the last 12 months, declined slightly, primarily due to the PhonePe charge discussed earlier,” the CFO said.

Inc42 has reached out to PhonePe for a comment on the matter. This story will be updated upon receiving their response.

For the quarter ended September 2026, Walmart International’s operating income fell 41.7% to $0.7 Bn. On a constant-currency basis, it dropped 46.3% to $0.6 Bn, with the company clearly stating that the decline was “negatively affected by the PhonePe compensation charge.”

Operating expenses for the segment also rose 17.6% to $6.7 Bn, partly because of the same charge linked to PhonePe. Walmart said the expense was booked in anticipation of the fintech unicorn’s public listing.

The disclosure comes just months after Inc42 exclusively reported that PhonePe launched an ESOP buyback programme of INR 700–800 Cr, one of its largest to date, as part of its IPO preparations. 

Notably, the company has taken the confidential route to file its draft red herring prospectus (DRHP) with the Securities Exchange Board of India (SEBI) earlier in September. As per sources, the company’s IPO is expected to be comprised solely of an offer for sale (OFS) component of INR 12,000 Cr ($1.35 Bn).

Alongside parent Walmart, Tiger Global and Microsoft will also be looking to offload their stake via the IPO, which is expected to value the UPI-market leader in a range of $7–8 Bn.

Meanwhile, Walmart’s other major India investment, ecommerce major Flipkart, again played an important role in its international performance for the quarter. The retail giant attributed part of its 24.2% gross profit rate in Q3 FY26 to the timing of the Big Billion Days (BBD) sale. While Walmart’s US business lifted overall margins, the company said international results were shaped heavily by how Flipkart scheduled its flagship event this year.

According to Walmart, international margins came under pressure due to “channel and format mix changes,” a shift driven significantly by the timing of Flipkart’s BBD sale. The event’s scheduling altered how revenue and costs flowed across quarters, affecting comparisons through the period.

This comes when Flipkart’s B2C marketplace arm crossed the INR 20,000 Cr revenue mark in FY25, with operating revenue rising 14.4% year-on-year to INR 20,493 Cr and total revenue, including other income, touching INR 20,807.4 Cr. 

Flipkart's Financial Snapshot

Source: Inc42 Datalabs

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The company also narrowed its net loss by 37% to INR 1,494 Cr, driven partly by a sharp increase in marketplace services income, which more than doubled to INR 7,750.6 Cr, even as collection services revenue fell 21%. 

Important to mention that Flipkart is also enroute to the Indian bourses, with recent developments including internal approvals to shift its domicile from Singapore to India.